All About IRMAA

By Barbara Wilcox, SHIP Counselor

People who are in higher income brackets have to pay more for their Medicare Part B and Part D premiums than people who are not high-income. This is called Income-Related Monthly Adjustment Amount (IRMAA). In the last issue of The Retiree Guardian, I gave the income brackets and the higher premium amounts for 2024.    But you may ask, why does IRMAA exist, and how does it work?  In this article, I will try to answer questions you may have about IRMAA.

Q — What’s the history of IRMAA? When was it instituted?

A — IRMAA was established as part of the 2003 Medicare Modernization Act (MMA), signed into law by President George W. Bush. This Act is better known as the law that introduced prescription drug coverage to Medicare. The new increments to Medicare premiums for higher-income people were a little-known part of the law. The higher premiums were first charged in January 2007.

Q — Why was IRMAA instituted?

A — While I can’t pretend to know what was on Congress’ mind in 2003, I can tell you that the provisions that led to IRMAA were in the Cost Containment section of the law. Title VIII, Subtitle B (Section 811) says “…beneficiaries with incomes over $80,000 for an individual or $160,000 for a married couple will be asked to contribute more to the cost of their Medicare benefits through payment of a higher premium.” It stands to reason that if people with higher incomes pay higher premiums, then that saves Medicare money. Over the years, the income brackets and the payment amounts have changed, but the basic structure of IRMAA has remained the same.

Q — Which part of the government collects this money?

A — Social Security collects premiums for Part A (if owed) and Part B, including any IRMAA owed, from us Medicare beneficiaries. It also collects the IRMAA additions to Part D; your Part D plan or Medicare Advantage Plan collects the basic insurance premium for prescription drug coverage. (Some plans don’t charge a monthly premium.)             

Q — How does Social Security know my income level?

A — The 2003 law “Amends the Internal Revenue Code to direct the Secretary of the Treasury, upon written request from the Commissioner of Social Security, to make appropriate disclosure of tax return information to carry out the Medicare part B premium subsidy adjustment.” It now is an automatic process each year. IRS sends your income information from your most recent tax return to Social Security in the latter part of the year, when your premiums are being determined for the following calendar year. For example, the premiums you are paying in 2024 are based on your 2022 income, because that was the most recent tax return you had filed late in 2023, when your 2024 premiums were determined.

Q — What income number is used to determine my premium level? 

A — Social Security uses your Modified Adjusted Gross Income (MAGI) to determine if you must pay IRMAA, and the amount you pay. MAGI does not appear on your tax form, but for most people MAGI is the same as Adjusted Gross Income (AGI), found on line 11 of your IRS Form 1040.  There are a number of things that the government uses to modify the AGI to produce MAGI, such as interest on student loans, self-employment tax, foreign investments, tax-free interest on municipal bonds.  I am not a tax expert, so I can’t really explain all of this. All I can say is that the financial information you provide when you file your taxes goes into the calculations.

Q — How do I know if I am required to pay IRMAA?

A — The first time your income hits the threshold for IRMAA, you will receive an Initial IRMAA Determination Notice from Social Security. After that, this information is included in the annual notice you receive from Social Security each December stating what you will be receiving and paying the following calendar year.

Q — What if my income was high two years, but it no longer is as high.  Do I still have to pay IRMAA based on that previous, high income?

A — If you have had a “life-changing event” that lowered your income, you can appeal.   Go to SSA.gov and click on the Medicare menu to find “Request to lower IRMAA.” From there, you can download Form SSA-44, fill it out, and return it to Social Security by mail, fax, or in person at a Social Security office. Follow the instructions on the form, or call Social Security for assistance (1-800-772-1213).

Q — What life-changing events are accepted to lower IRMAA?

A — These are listed on Form SSA-44. The SSA web site says, “Life-changing events include marriage, divorce, the death of a spouse, loss of income, and an employer settlement payment.”

Q — What if I filed an amended tax return with a lower income, but Social Security is using the higher income I originally filed? 

A — Call Social Security at 1-800-772-1213 and tell them you want to lower your IRMAA because you filed an amended tax return.

For further help understanding your IRMAA or appealing your IRMAA amount, talk to your local SHIP counselor by calling 1-877-839-2675.

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